New Jersey’s innovation economy just got stronger as the FY26 state budget was passed a few weeks ago when three bills — all strongly aligned with innovation, investment, and advanced manufacturing — advanced out of the Assembly Appropriations Committee.
While the legislation reflects thoughtful, bipartisan progress — and we commend the sponsors, the Legislature, and the Murphy administration for championing these proposals – there’s more to be done if New Jersey is to become a leading innovation epicenter.
First, here’s a summary of the encouraging new legislation that’s poised to fuel capital investments, startup growth and job creation.
- A-2365: Angel Investor Tax Credit Expansion
This bill increases tax credits from 20% to 35% for qualified investments in New Jersey’s emerging tech companies. For investments in women-, minority-owned, or low-income community-based startups, the credit rises to 40%. It’s a bold move that encourages early-stage capital in sectors where we already lead — life sciences, AI, fintech, and climate tech.
- A-4455: Qualified Small Business Stock (QSBS) Tax Reform
This legislation allows New Jersey investors to deduct capital gains on qualified small business stock held for more than five years — finally aligning us with federal tax treatment. Right now, we’re one of only five states that penalizes long-term investment in startups. This bill helps correct that and signals that New Jersey is open for innovation-friendly capital. While long overdue (I highlighted this in a 2022 article) and not retroactive, it is a very powerful signal to entrepreneurs, especially those relocating here.
- A-5687: The “Next New Jersey Manufacturing Program”
Manufacturing may not make headlines the way startups do, but it remains the backbone of a strong, resilient economy. This bill directs $500 million from existing Aspire and Emerge tax credits to incentivize domestic manufacturing, including clean energy components. It’s timely, strategic, and fiscally smart — leveraging existing funds for maximum impact.
Next Steps for Innovation Growth
It is imperative that New Jersey not lose steam now.
To become the East Coast capital of innovation — and not just a one-of-many participant in the global tech economy — we believe the next administration must prioritize three strategic imperatives:
1. Lower the Tax Burden on Entrepreneurs and Investors
While the QSBS bill is a step in the right direction, New Jersey’s overall tax environment remains an enormous challenge. Startup founders and investors often tell us that neighboring states — or states like Texas and Florida — offer more favorable conditions for starting and scaling a business. We need to be competitive. Reforms to capital gains treatment, income tax burdens, and business tax rates — especially for early-stage companies — will be essential for attracting companies here.
2. Double Down on EDA Innovation Programs
From NJ Ignite and the Innovation Evergreen Fund to the NJ Accelerate program and the Small Business Emergency Assistance Grant, the New Jersey Economic Development Authority (NJEDA) has a best-in-class toolkit for supporting startups. These programs do work and they are helping to fill capital gaps, reduce risk for investors, and create high-paying jobs here at home. But they simply cannot remain vulnerable to election cycles and other unpredictable challenges. Let’s maintain and expand these initiatives by better cementing them as permanent pillars of our economic strategy.
3. Cut Red Tape and Bureaucracy
Founders and fund recipients consistently recognize the power of EDA programs to catalyze growth. By streamlining application and compliance processes, improving response times, and reducing regulatory hurdles, NJEDA programs could deliver impact even faster. The innovation economy moves quickly — and our public systems can help it keep pace.
Momentum for the Future
New Jersey has all the raw ingredients to lead in the innovation economy: world-class universities, one of the most diverse and skilled workforces in the country, a strategic location, and deep sector expertise in fields ranging from biotech to fintech to clean energy.
We are making important progress — and these three bills are proof of that.
But let’s not stop here. Let’s build a true innovation flywheel — one that doesn’t just rely on big announcements or press releases, but on consistent, predictable, and founder-friendly policies that send a clear message: New Jersey is the best place in America to build what’s next.
James Barrood is the Founder/CEO of Innovation+, a global community of entrepreneurs and innovators. He also leads INNOVATE100 and serves as an advisor to startups, growth companies and higher ed institutions as well as Tech Council Ventures and JumpStart Angels.
Kim Case is Executive Director of the Research & Development Council of New Jersey and President of CN Communications International, Inc.
